Louis Vuitton is a luxury goods company founded in 1854 known for leather goods and luggage. It has grown under CEO Bernard Arnault to become highly profitable through vertical integration of manufacturing and distribution. Key success factors are maintaining the brand image of quality and differentiation. The hybrid alternative of producing both artisanal and accessible goods using different manufacturing models could appeal to all customer segments while balancing heritage and growth. Forecasts show continued revenue and profit increases through 2015 if this strategy is implemented through expanding production, entering new markets, and adjusting pricing. Risks include losing across all segments, and the contingency plan would be to shift to the heritage production model.

1. LOUIS VUITTON
Conlon Cash, Brooke McCarter,
Sundeep Shamanur, and Cole Welch

2. LOUIS VUITTON HERITAGE
Founded: 1854
LOUIS VUITTON GEROGES HENRI
•Three Rules VUITTON RACAMIER
•Innovation •Company-owned
Stores
BERNARD MICHAEL BURKE
ARNAULT •Current
•Profitability
and Efficiency

3. SITUATION ANALYSIS
Internal Positive External Positive
• Distribution • Asian Market Growth
• Manufacturing • Perfume Market
• Assets • Economic Rebound
• Lean Production
Internal Negative External Negative
• Unstable Other • Volatile Exchange Rate
Activities/Eliminations

4. KEY SUCCESS FACTORS
Image
Quality
Differentiation

5. FIVE FORCES
SUBSTITUTES
Low
SUPPLIERS COMPETITION BUYERS
Low High High
NEW
ENTRANTS
Low

6. INDUSTRY CUSTOMER SEGMENTS
Absolute
Aspirational
Accessible

7. ISSUE IDENTIFICATION
Is Louis Vuitton’s growth rate
sustainable?
Can Louis Vuitton balance the
core values and heritage of the
company under the pressures of
growing the business?

8. AUTOMATED ALTERNATIVE
Shift production to a more
assembly line model
Pro • Higher customer base
Con • Likely loss of high-end market

9. HERITAGE-BASED ALTERNATIVE
Luxury goods use more artisan
labor, as when the company was
founded
Pro • Please high-end customers
Con • Lose accessible customers

10. HYBRID ALTERNATIVE
Produce “accessible” goods using
automation and “absolute” goods
using artisan labor
Pro • Potential gain in all segments
• Highest risk to lose in all segments
Con
• Potential to cheapen the brand

11. UNIVERSAL IMPLEMENTATION
Enter perfume market
Decrease secondary sales
Increase European prices to
combat grey market
Attract Asian market to Europe

12. QUANTITATIVE ALTERNATIVE ANALYSIS
Automated Heritage Hybrid
Profit
20%
4 3 5
Product
Quality 3 5 4
20%
Absolute
30%
1 5 4
Aspirational
20%
3 4 4
Accessible
10%
5 2 4
Totals 2.8 4.1 4.2
*Ranked 1-5, 1 = Worst, 5 = Best

13. RECOMMENDED STRATEGY
Louis Vuitton should pursue the
hybrid strategy where it
continues to make handcrafted
goods, while also creating an
accessible brand using a cost-
effective manufacturing
process.

14. INCOME STATEMENT FORECAST
LVMH Income Statement through 2015
2010 2011 2012 2013 2014 2015
Revenues 20320 23659 24996 26408 27900 29476
Gross Profit 13136 15567 16247 17165 18135 19159
Operating Profit 4169 5154 5249 5546 5859 6190
Net Profit 3032 3065 3474 3671 3878 4097
*In millions

15. FORECASTED REVENUE
35000
30000
25000 Revenues
Revenues*
20000
15000
2010 2011 2012 2013 2014 2015

16. FORECASTED NET PROFIT
5000
4500
4000
Net Profit
3500 Net Profit*
3000
2500
2010 2011 2012 2013 2014 2015

17. IMPLEMENTATION
Short Term Medium Term Long Term
(0-6 (6– 12 (12– 18
Months) Months) Months)
•Figure out •Review
legal •Begin sales data
issues production •Evalute
•Create and sale of current
brand and accessible plan
logo brand and
perfume •Keep with
•Research hybrid plan
and •Continue or switch
development incremental to heritage
•Begin to European plan
increase price
European increase
prices

18. RISKS AND CONTINGENCIES
Risk: losing in all segments
Contingency: implement Heritage
Strategy

19. When to Exit:
Fit
Performance
Competitive Advantage

20. QUESTION
AND
ANSWER
SESSION

21. COMPETITION
Hermès
Gucci
Bottega Veneta
Prada
Chanel
Coach

22. QUOTES
“If you control your
factories, you control your
quality” and “If you control your
distribution, you control your
image.” – Bernard Arnault

23. QUOTES
Absolute Aspirational Accessible
8-10% Growth 6-8% Growth Below Market
“Luxury is not how much you can
buy. Luxury is the knowledge about
how to do it right, how to take the
time to understand and choose well.
Luxury is buying the right thing”–
customer at Daslu in Sau Pualo,
Brazil